There are many exciting possibilities that come with buying a new home. It’s helpful, though, to remain organized and prepared so that you don’t become overwhelmed by the more daunting aspects of the process. This essential checklist to buying a home will help guide you through the entire process.
Prepare Yourself Financially
Income: Start with your monthly income. If you’re buying the home with someone, use your total incomes.
Debt: Subtract your monthly debt payments (car, insurance, credit card, student loans) from your income.
Credit Score: Check your credit score to see where you’ll stand when it comes to getting a mortgage. The better the credit, the lower the rate you’ll receive on the money you borrow.
Find Out What You Can Afford: A basic rule to follow is that you shouldn’t be spending much more than 30 percent of your gross income on monthly mortgage payments. Use this simple calculator to get an idea of the price range you’ll be looking at.
Estimate Closing Costs: Even with a mortgage you’ll need money for closing costs and a down payment. Closing costs can be as high as 3 percent of the purchase price of the house. A down payment will be 10 to 20 percent of the purchase price, depending on the market and your credit. Anticipate spending 1.5 times more than your down payment in total cash needed to buy a home.
Get Pre-Approved: Find a lender you trust and want to work with and go get pre-approved for a mortgage. You’ll need proof of income, proof of assets, good credit, employment verification, and other documentation to apply. Keep in mind that you may be approved for more than you can afford, but you won’t fall for that.
Search For Your Home
Do Your Research: Look online at houses, talk to friends who’ve been through the process and people who live in the neighborhoods you’re looking in. You’ll want to get a real estate agent, but you want to inform yourself as well.
Find A Real Estate Agent: If a friend can recommend someone they’ve worked with, then that’s the best scenario.
Tour Homes: This is the most fun part, so enjoy it! Think big and then scale back to what’s feasible. Think about long term value and the high value aspects of a given home. Things like location, square footage, school system are much bigger considerations for value that you can’t change. Don’t get caught up on easy fixes like paint, ugly carpet, and appliances. Also, realize that buyers spend an average of 10 weeks looking at homes, so be patient.
Make An Offer
Submit An Offer: Once you see a place you love, act quickly to put in an offer. Your agent will take care of this for you, including the part about deciding how much you should put it your offer.
Get The Home Inspected: If they accept your offer, you’ll need to get the house inspected to make sure everything’s in tip-top shape. If it’s not, then that’s a discussion to have with the current owners. You can either ignore the issues if they’re small or work out a deal to have the owner fix certain things.
Get The Home Appraised: Now your lender will want an appraisal in order to issue your mortgage.
Seal The Deal
Settlement Statement: A document you will sign that outlines the final fees and charges.
Promissory Note: Sign the legal document outlining the terms of your home loan.
Deed of Trust: This is a document you’ll sign that basically puts up your new home as security on the home loan you’re taking out to pay for it.
The Deed: When both parties sign the deed, you’ll officially be a new home owner. Congratulations!